Transcription of PRIVATE COMPANY VALUATION
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PRIVATE COMPANY VALUATION
PRIVATE COMPANY VALUATIONA swath DamodaranAswath Damodaran124125 Process of Valuing PRIVATE Companies The process of valuing PRIVATE companies is not different from the process of valuing public companies. You estimate cash flows, attach a discount rate based upon the riskiness of the cash flows and compute a present value. As with public companies, you can either value The entire business, by discounting cash flows to the firm at the cost of capital. The equity in the business, by discounting cashflows to equity at the cost of equity. When valuing PRIVATE companies, you face two standard problems: There is not market value for either debt or equity The financial statements for PRIVATE firms are likely to go back fewer years, have less detail and have more holes in Damodaran1251261. No Market Value? Market values as inputs: Since neither the debt nor equity of a PRIVATE business is traded, any inputs that require them cannot be ratios for going from unlevered to levered betas and for computing cost of prices to compute the value of options and warrants granted to employees.
upscale restaurant is more likely to be reflect high-end specialty retailers than it is restaurants. The unlevered beta for 45 high-end retailers is 1.18. Aswath Damodaran 134. 80 units of firm specific risk 20 units of market risk Private owner of business with 100% of your weatlth
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